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Market activity and analysis

Market activity was quiet on Monday. Most people were trying to get a feeling for which direction the market would take. Packer prices were mostly steady while processor BS,CBS, and HBH were down. The market on Tuesday was extremely quiet with few trades reported. Prices were up in most selections.

The hide market was holding steady on Wednesday with a modest amount of trades. Several offers at last week’s prices and bids at quite low levels were reported. A few sellers commented later in the day that interest was picking up and appeared to be better than the previous week. Market activity was fairly good with prices down on a number of selections offsetting the pickup on Tuesday.

There were a large number of trades reported on Thursday—very likely spurred on by the seasonal weight changes—and a sizeable number of trades were taken on Friday; unusual for a Friday.

The week’s market was marked with a significant amount of trades reported. It was also a good week in terms of the USDA Export Sales finally breaking the slaughter after eight straight weeks of lacklustre sales. Prices for the most part seemed to be setting a range of trading, bouncing a dollar or so up and down from one day to the next, ending the week steady to down a dollar.

The amount of actual sales for the week is difficult to project, but the Chinese and Korean holidays during the latter part of the week slowed business. Sales volume is expected to be down and we would project somewhere in the range of 400,000.

Slaughter estimates for the week at 635,000, were down 15,000 from a week ago. Coincidentally, the slaughter was exactly the same as one year ago.

Export sales

The combined wet blue and hide sales exceed slaughter by a small margin of 3,000 pieces. For the week, the combined sales were 652,000 against kills of 649,000 comprising 532,000 net hides and 120,000 wet blue.

Looking a little closer at the whole hide numbers last week, gross hide sales exceeded net sales by a little more than 20,000 pieces. This is comprised mainly from offsetting cancellations and increases in China, Taiwan, and Hong Kong. China and Taiwan had negative adjustments of 14,541 and 9,008 while Hong Kong had a positive change of 8,747.

Export shipments of combined wet blue and whole hides for the week were 518,000, behind kills by 131,000. On a year-to-date basis through week 39, export shipments are ahead of both slaughter and last year’s shipment numbers. In 2009 through week ending September 24, shipments are 25,004,000—exceeding slaughter of 24,537,000 by 467,000. During the same period last year, shipments were 187,000 under this year’s at 24,817,000 and under slaughter of 25,611,000 by nearly 800,000 pieces.

Once again we are left trying to understand what the statistics mean to the marketplace. I offer a few thoughts. For beginners, most would agree that breaking the eight-week slide in sales goes a long way toward putting a floor on the hide market. In addition, many suppliers have been bringing their sales position in and they may be reaching a more comfortable position.

Regarding shipment numbers, they appear to be quite healthy especially if you take into account the US domestic consumption of hides. On the other hand, we do not know how much of the yearly figures were carried over from last year. Regardless, they indicate that sellers are working on keeping inventories down, which is a healthy way to operate any business.

Demand is a little more elusive at the moment. As the economies slowly recover, manufacturers are beginning to cautiously fill their depleted inventories. Tanners are seeing better business in general but are very keen to pricing and are refraining from buying once the prices reach certain levels.

Was the previous week’s buying a sign that prices have reached a level that makes sense or was it driven by demand for leathergoods? My guess is it was a little of both, but primarily the former.

The international market

UK

Reasonably good inquiry was received mid-week with similar/unchanged levels from the previous week. The cow interest was also maintained. It does seem that there is a shift towards European material as European hides are now selling at prices level or higher than US hides whereas in the past we had to be about 10% below in order to sell to Asian tanners. With Chinese tanners now on holiday there will be very little activity for this week. However, we expect levels to remain unchanged in the short-term and maybe some small decreases longer term if European slaughter increases (which seasonally it should do) and if US prices ease further.

China

The market seemed like the previous week after a large amount of buying. Sources reported prices for BBS and HTS around $56 and $58 to $59 for HNS C&F. There was good interest in BBS and HNS; however, buyers are bidding down a little hoping to buy under $55 but not finding many takers.

Premium dairy cows were in demand and going for as high as $44 to $45 while heavy native cows could be purchased for under $35.

Australia

The Australian market continued to be relatively firm with good demand for better selections of heavy weight hides. There was also interest for Queensland ticky hides from the upholstery sector.

In the overseas markets, Chinese tanners were holding back on purchases. Italian tanners, meanwhile, were attempting to push prices down claiming that finished leather cannot support higher cost. The Italian buyers were interested in lighter-weight wet blue but were also resistant to higher prices.

Local hide supply remaind an issue with poor meat trading conditions continuing along with high cattle prices. Many of the major meatworks were slaughtering approximately 20% lower volumes than is the norm for this time of year. One source characterised the business as “demand overseas remains firm but the fight for available hides in Australia has destroyed any profit in the business and driven all major processors into the red”. Supply forecasts into next year are not looking much better.

Brazil

The market is still attempting to settle down following announcements of JBS SA’s entry into the leather business. The green hide market is very unstable due to the uncertainty of what the impact this major change will have on supply. With that, prices for blue and green hide continue to increase.

Prices for green hides increased last week nearly $0.10 US$ to $0.61, while wet blue TR 1 asking prices went up around $0.05 per foot to $1.10.

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